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Opposition Lawmaker Demands Probe into Netherlands-Shell Tax Deal

Trust Bloomberg Tax for the international news and analysis
to navigate the complex tax treaty networks and global business regulations.

By Linda A. Thompson

A Dutch opposition lawmaker is pushing the government to launch a parliamentary inquiry
into Shell, calls that follow criticism of the oil giant’s past deals with the tax
authority.

Jesse Klaver, the leader of the Dutch Greens, is specifically focused on a 2004 tax
ruling the tax authority issued to Royal Dutch Shell Plc. A parliamentary inquiry
would be lawmakers’ only shot to question Shell executives about the deal, and would
be the latest development in scrutiny of the company’s tax planning.

“Given all the confidentiality there is, we only have one method left and that’s the
method of the parliamentary inquiry. If it reveals that money indeed unjustly went
to Shell, I think we should get it back,” Klaver said.

The country’s controversial 15 percent withholding tax on dividends is at the center
of the controversy. Klaver’s call follows claims from a Dutch academic that the company
avoided the tax by routing dividends through a trust in the Channel Island of Jersey.

Shell received permission from the government to use the structure. But the setup
has cost the Dutch tax coffers 7.5 billion euros ($8.7 billion), according to the
Amsterdam-based Centre for Research on Multinational Corporations.

Lawmakers will vote on the motion July 3. Although motions are not binding, they are
seen as increasing pressure on the government to take action on an issue when passed
by a large majority in the House.

A spokesman for Shell declined to comment.

An inquiry, whether public or not, could increase pressure on the European Commission
to open a state aid investigation into the Shell structure—which could result in the
company paying a large sum in back taxes to the Dutch government.

Unilever Too?

The Dutch center-right government is planning to end the tax, a move that has been
roundly criticized by opposition parties and tax justice advocates as a gift to foreign
shareholders.

Peter Kavelaars, a partner at Deloitte LLP in Rotterdam, told Bloomberg Tax a parliamentary
inquiry into the tax deal was highly unlikely.

“This is a motion that’s coming from the opposition and they don’t have a majority
in the House,” he said June 27, pointing out that the motion would have to be supported
by a ruling party to garner approval.

Kavelaars said that if the motion did muster sufficient votes, any future parliamentary
inquiry is likely to cast a wide net, extending beyond just Shell. Other large, international
corporations are likely to be summoned to testify as witnesses, he said.

“And the most important company that could come into view would be Unilever because
of its decision this spring to move its headquarters to Rotterdam,” he said.

Unilever Netherlands announced in March it would make its Dutch unit its sole head
office, a decision widely viewed as being driven by the government’s move to scrap
the dividend tax. While Unilever executives have warned that the dividend withholding
tax is a burden on the company’s foreign shareholders, a spokesperson told Bloomberg
Tax at the time that the decision wasn’t driven by tax considerations.

A spokesperson for Unilever declined to comment on the calls for an inquiry.

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